Q2 DSL Growth Remains Stable

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The three largest regional Bell operating companies reported stable digital subscriber line growth during the second quarter — traditionally a slow period — and strong year over year growth.

Verizon Communications, SBC Communications Inc. and BellSouth Corp. added a combined 438,000 DSL subscribers in the second quarter of 2002, compared to 441,000 in the first quarter and 281,000 in second quarter 2001.

SBC led the charge, posting a substantial DSL-subscriber gains for the period. The RBOC tallied 213,000 additions, a dramatic increase over a year ago, when it added only 83,000 subscribers, and a sequential gain from first quarter's 183,000.

SBC now counts 1.7 million DSL subscribers.

But SBC was less sanguine about the rest of its business. Revenue for the quarter dropped to $13.1 billion from $13.6 billion a year ago. Earnings fell to $1.8 billion from $2.1 billion, with lower revenue generated from business phone lines and residential service, where access lines were reduced 3.8 percent.

"We do not see indications of an upturn. We see no revenue rebound this year," SBC Chairman Ed Whitacre said.

On DSL, he said, "We expect to have a very good year."

Whitacre said cable MSOs "continue to take some telephony customers," but that trend has not increased dramatically.

INSTALLS TRIMMED

Verizon added 150,000 DSL subscribers in the second quarter, matching the total of its first-quarter additions, and a 25 percent increase over second quarter 2001's 120,000 additions. Verizon said it's cut down DSL installation intervals from 15 days to five days. A do-it-yourself installation kit also has helped, the company said.

The company reported a consolidated net loss of $2.1 billion in the quarter, related to after-tax charges from Genuity Inc. and investments in Telus Corp. and Cable & Wireless. Year over year quarterly revenue slipped from $16.9 billion to $16.8 billion.

"The economy is still soft and we see no rebound in 2002," said Doreen Toben, Verizon's executive vice president and chief financial officer. The gloomy economy has caused Verizon to cut capex spending for this year to $13 billion to $13.5 billion, down from $14 billion to $15 billion.

Verizon also announced it will start bundling local phone, long-distance phone, wireless and DSL in August.

BellSouth posted weaker numbers, with second quarter net income dropping to $293 million from $880 million a year ago. As a result of the weak economy, the company lowered its forecasts for revenue, capital spending and DSL growth this year.

BellSouth added 75,000 DSL subscribers in the quarter, down from first quarter's 108,000. It was the fewest DSL additions for BellSouth since third quarter 2000, when the company was just gearing up its DSL business. The company now estimates it will have 1 million DSL subscribers by yearend, down from an earlier forecast of 1.1 million.

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